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Investment drive kicks off.

THE SULTANATE of Oman, bouyed by a general economic upturn in the Gulf, is the latest of the six Gulf Cooperation Council (GCC) states to launch a major foreign investment and joint venture drive aimed at the West, Far East and countries such as India.

Underpinning this foreign investment drive is the current modernisation of the Muscat Stock Exchange (MSE) and a proposed privatisation programme, which according to Omani officials offers good investment opportunities for foreign firms in the country's economic diversification and development plans. A post-Gulf War recovery, lower interest rates and an increase in liquidity, have boosted GCC stock markets and underlines a growing confidence in the regional economies.

In the case of Oman, which like other GCC states is also trying to diversify its economic base away from oil and gas, non-oil exports in 1992 rose to $910m - up by 40 per cent on the previous year. Most of these exports - some $484m worth - went to the UAE; $110m worth to Iran; and the rest to Hong Kong, the rest of the GCC, US, and Britain. At the same time GDP growth rate is expected to total between 3.2 per cent to 4 per cent this year. Oman's budget deficit, according to a study by Emirates International Bank, is estimated to total $1.1bn this year, although this is expected to fall over the next few years, should oil prices generally remain stable. Oil exports last year rose to $4.5bn from $4.1bn in 1991, and will continue to be the major revenue earner for Oman in the forseeable future, despite efforts to diversify revenue sources.

According to MSE director Mahmoud Al-Jarwani, the current stock exchange reforms will widen the scope for foreign investors. The hope is that new equity ventures worth $520m and the launch of government development bonds totalling $1.1bn over the next five years would stimulate the MSE and give a major push to share dealing.

Floor trading at the MSE started in 1989, the year of its establishment, with 75 firms with a total capitalisation of $982m. Last year this figure increased to 86 firms with a total capitalisation of $1.56bn.

British, US, Indian and Japanese companies have been targetted in recent months for increased investment in the Omani economy either through joint ventures or participation in its privatisation programme, due to be finalised later this month and considered to be the biggest in the Gulf.

British delegates at a recent Business Forum in London organised by the BOTB's Committee for Middle East Trade (COMET), the CBI and the Oman-British Friendship Society (OBFS), confirm that there are good investment opportunities in the sultanate especially in using Oman as a base for the Gulf and Indian Ocean basin; in its privatisation programme and in terms of a competitive investment incentive package.

The foreign investment momentum is to be kept up by another foreign investment seminar and Oman industrial products exhibition due to be held in London next month and organised by the Arab-British Chamber of Commerce and the OBPS.

The Omani economy is undergoing perhaps the most fundamental economic reforms in the GCC, especially in its privatisation drive. According to MSE director Mahmud Al-Jarwami, the privatisation programme is aimed at cutting government expenditure and generating revenue for the Treasury and to encourage foreign and local companies to invest locally.

Despite close Omani-British political links, British direct investment in the country totals a mere Omani riyals (OR) 5.4m. This out of a total foreign investment of Or72m in 1992, mainly in the transport, industrial and financial sectors. Despite the fact the joint ventures are always high on the agenda of official Oman-British and Oman-European trade talks, not many have materialised. In the past, says Sheikh Aflah Al-Rawahy, Chairman of the Management Committee of the Oman-British Friendship Society and chairman of the Bin Salim Enterprise, the problem was "a lack of specific framework for joint investment schemes. This is no longer the case".

The priority areas for foreign investment, according to Sheikh Al-Rawahy, are fisheries, agriculture and animal husbandry, water management, tourism and general manufacturing industries. However, there are also good opportunities in a planned petrochemical plant, a gypsum board manufacturing plant based on huge raw material reserves, a magnesium plant to source huge local dolomite reserves.

Oman is also seeking foreign cooperation to do feasibility studies for the exploitation of natural gas supplies, the building of an aluminum smelter, an integrated steel plant to take advantage of a projected continuing construction upswing in the country and region, and a fertiliser factory. There are also good future prospects for potash production sourcing local brine reserves. The government is also encouraging the development of consumer goods manufacturing industry and information sector.

Oman, says, Sheikh Al-Rawahy, offers long-term political stability, a good geographical location, continued development of infrastructure, market growth in the GCC and the India Ocean Basin and economic liberalisation including privatisation, a market economy a competitive foreign investment incentive package.

One sector which has good potential is natural gas and petrochemicals. According to Commerce Minister Maqbool Ali Sultan, there are plans to develop projects in this sector worth $10bn over the next few years. These include a liquified natural gas (LNG) plant to be built by a 51:49 joint venture between the Oman Oil Company (OOC) and a consortium to include the Royal/Dutch Shell Group, France's Total S.A., Portugal's Partex Corporation and Japan's Mitsubishi Corporation, Mitsui & Company Limited and Itochu Corporation. Construction work on the LNG plant is due to start in February 1994.

Oman's proven gas reserves, according to government figures, has risen from 255bn cubic metres to 480bn cubic metres in the last few years. A $700M polyethylene plant is planned and due for completion in 1995.

Oman is also pressing ahead with a $4bn plan to build an underwater gas pipeline to India to export some 50mm cubic metres of gas per day. OOC recently signed a pipeline development accord with a consortium including Overseas Bechtel Inc, McDermott International Inc - both from the US and Italy's Snamprogetti Spa.

OOC is also involved in joint projects abroad especially in Kazakhstan and India. It is part of an international joint venture called the Caspian Sea Pipeline Company, which will export oil from the Kazakh oil fields to a Turkish Mediterranean terminal at Yumurtuluk via a proposed new oil pipeline.

OOC also has a 40 per cent stake in CXO, a joint venture with Caltex Petroleum Corporation of the US, which is planning involvement in refining oil especially Thailand, India, Central Asia, Russia and China, and in marketing oil and oil products on international markets.
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Title Annotation:privatization in Oman
Publication:The Middle East
Date:Oct 1, 1993
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